Naked Wines’ chief executive is apologizing to shareholders after the company posted a loss in a “difficult” year
- Naked Wines posted losses as it struggled to attract new customers
- Chairman and founder Rowan Gormley apologized to shareholders
The chairman of Naked Wines has apologized to shareholders after a “tough” year in which the online wine seller posted a loss.
New sales fell from £34m to £26.9m in the year to April 3, 2023, and Naked Wines posted a loss of £15m in 2023, compared to a profit of £2.9m last year.
Founder Rowan Gormley said: “Firstly, an apology.” The entire board of Naked Wines regrets that your support and patience as shareholders, winemakers, angels and employees have not been rewarded. We are all committed to making things right.”
Corked: Naked Wines posted losses after a difficult year in which it struggled to attract new customers
In July, the group appointed Gormley as chairman to boost growth after first-quarter sales fell short of forecasts.
“Make no mistake, trading conditions are difficult. “As expected, high inflation, higher alcohol taxes and falling disposable incomes have led to sales and cost pressures.”
Naked Wines was bought by wine retailer Majestic Wine for £70m in 2015, before Majestic announced a restructuring of its business four years later.
Majestic has struck a deal with Fortress Investment Group – owned by Japan’s Softbank – to sell its 200 branches and around 1,000 employees.
Today’s results show the opposite development of the two brands as they went their separate ways.
While Naked Wines was a clear growth winner as consumers moved online, Majestic’s future was less certain as experts pointed to the death of the high street.
However, Majestic Retail and Commercial recently opened a new store in Newark and plans to open three more in the coming months.
Shares in Naked Wines plunged almost 10 per cent to 63.25p on Tuesday morning and are down over 50 per cent since the start of the year.
Chief executive Nick Devlin said there had been an inventory build-up which had hit short-term liquidity and added costs which had hit profits.
He also said the supply chain was underutilized, adding further costs. He said his focus now is on “profitable growth.”
The company has achieved further £7m of cost savings over the next 12 months, primarily in its supply chain, and will reduce its wine purchasing commitments as well as selling excess wine to the mass market.
Despite the disappointing results, Devlin believed Naked Wines could stabilize as a “significantly larger and significantly more profitable company than it was before the pandemic.”
Gormley reiterated the optimistic outlook, saying the wine seller “does not have a general sales problem… our existing customers are resilient despite the difficult conditions.”
The fluctuation rate of existing customers has improved by two percent in the last year, but acquiring new customers is proving to be challenging.
Analysts at Liberum said there remained a very significant risk that the group would not attract enough high-quality new customers and that lower revenue retention would lead to further inventory write-downs.
It added: “We continue to question Naked Wines’ ability to drive sustainable profitable growth as its 1.7x payback remains inadequate.” “Our concern now is that the days of stop-start growth strategy are returning .”
The price target was lowered to 50p.